Correlation Between Apollo Hospitals and Reliance Industries

Can any of the company-specific risk be diversified away by investing in both Apollo Hospitals and Reliance Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Apollo Hospitals and Reliance Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apollo Hospitals Enterprise and Reliance Industries Limited, you can compare the effects of market volatilities on Apollo Hospitals and Reliance Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Apollo Hospitals with a short position of Reliance Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Hospitals and Reliance Industries.

Diversification Opportunities for Apollo Hospitals and Reliance Industries

-0.32

Correlation Coefficient

Apollo Hospitals  Reliance Industries

Very good diversification

The 3 months correlation between Apollo and Reliance is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Hospitals Enterprise and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Apollo Hospitals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Apollo Hospitals Enterprise are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Apollo Hospitals i.e., Apollo Hospitals and Reliance Industries go up and down completely randomly.

Pair Corralation between Apollo Hospitals and Reliance Industries

Assuming the 90 days trading horizon Apollo Hospitals is expected to generate 5.05 times less return on investment than Reliance Industries. But when comparing it to its historical volatility, Apollo Hospitals Enterprise is 8.99 times less risky than Reliance Industries. It trades about 0.09 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  110,924  in Reliance Industries Limited on October 10, 2024 and sell it today you would earn a total of  13,161  from holding Reliance Industries Limited or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apollo Hospitals Enterprise  vs.  Reliance Industries Limited

Apollo Hospitals Ent

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Hospitals Enterprise are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Apollo Hospitals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Apollo Hospitals and Reliance Industries

The main advantage of trading using opposite Apollo Hospitals and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apollo Hospitals position performs unexpectedly, Reliance Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Reliance Industries will offset losses from the drop in Reliance Industries' long position.

The idea behind Apollo Hospitals Enterprise and Reliance Industries Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.